Groupon 2011 Annual Report Download - page 43

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compensation and acquisition1
related expense to our segments. We use CSOI to allocate resources and evaluate performance internally. CSOI is a
non1
GAAP financial measure. For further information and a reconciliation to the most applicable financial measure under U.S. GAAP, refer to our
discussion under Non-GAAP Financial Measures in the " Results of Operations " section.
Operating Metrics
___________________________________________
41
•
Free cash flow.
Free cash flow, which is reconciled to "Net cash provided by operating activities," is cash flow from operations reduced by
"Purchases of property and equipment." We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is
similar to cash flow from operations, we believe it typically will present a more appropriate measure of cash flows as purchases of fixed assets,
software developed for internal use and website development costs are a necessary component of ongoing operations. Free cash flow is a non-
GAAP financial measure. For further information and a reconciliation to the most applicable financial measure under U.S. GAAP, refer to our
discussion under Non-GAAP Financial Measures in the " Results of Operations " section.
• Gross billings.
This metric represents the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of
estimated refunds. We consider this metric to be an important indicator of our growth and business performance as it is a proxy for the dollar
volume of transactions through our marketplace, net of tax and reserves. Tracking gross billings also allows us to track changes in the percentage of
gross billings that we are able to retain after payments to our merchant partners. Gross billings are not equivalent to revenues or any other financial
metric presented in our consolidated financial statements.
•
Active Customers.
We define active customers as unique individuals that have purchased Groupons during the trailing twelve months. We consider
this metric to be an important indicator of our business performance as it helps us to understand how the number of individuals purchasing
Groupons is trending.
• Gross billings per average active customer.
This metric represents the trailing twelve months gross billings generated per average active customer.
This metric is presented as the total gross billings generated in the trailing twelve months, divided by the average number of active customers in
such time period. Although we believe total gross billings, not trailing twelve months gross billings per average active customer, is a better
indication of the overall growth of our marketplace over time, trailing twelve months gross billings per average active customer provides an
opportunity to evaluate whether our growth is primarily driven by growth in total customers or in spend per customer in any given period.
•
Revenue per average active customer.
This metric represents the trailing twelve months revenue generated per average active customer. This metric
is presented as the total revenue generated in the trailing twelve months, divided by the average number of active customers in such time period.
Although we believe total revenue, not trailing twelve months revenue per average active customer, is a better indication of the overall growth of
our business, trailing twelve month revenue per average active customer provides an opportunity to evaluate whether our average customer is
purchasing deals with a higher or lower commission profile to Groupon.
Year Ended December 31,
2008
2009
2010
2011
Operating Metrics:
Gross billings (in thousands) (1)
$
94
$
34,082
745,348
$
3,985,501
Active customers (in thousands) (2)
*
374
8,940
33,742
Gross billings per average active customer (3)
*
*
160.05
$
186.75
Revenue per average active customer (4)
*
*
67.20
$
75.46
*
Not available
(1)
Reflects the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in the applicable period.
(2)
Reflects the total number of unique customers who have purchased Groupons during the trailing twelve months.
(3)
Reflects the total gross billings generated in the trailing twelve months per average active customer in the applicable period.